CONTRACT hire and lease options have for many years been a popular way for SMEs and larger corporations to fund their vehicles but the door’s open for individuals too.
Although the company car is still going strong, rising numbers of small businesses, self-employed people and business owners are turning towards personal leasing as their preferred method of vehicle acquisition.
In particular personal contract hire (PCH) has seen a spectacular rise in popularity with fixed monthly payments and no worry about depreciation at the end of the day.
You also have the option to include vehicle service maintenance and repairs, meaning no additional unpredictable costs.
At the end of the contract term you will not be able to buy the vehicle and it will be returned to the finance company. Then you start again with another new one!
By funding a vehicle personally, there is obviously no company car tax to worry about
Tax benefits of personal contract hire
The obvious savings that can be made are in company car tax, by far the most direct-to-pocket sting that company car drivers face.
By funding a vehicle personally, there is obviously no company car tax to worry about.
In addition, business drivers can claim business mileage expenses at the rate of 45p per mile, tax-free for the first 10,000 miles.
To put this into perspective, a 100-mile round trip would result in a payment of £45 – far more than the cost of the fuel, especially in a modern car, since it takes into account the full cost of running a car.
Alternatively, if you are self-employed, you can claim a percentage of your running costs in relation to your business (not personal) mileage.
Lower payments for a better car
If you are looking to ease the squeeze on your pocket then the benefits of leasing also stack up, especially when comparing with buying outright or financing.
When you take on a personal contract agreement, you get to drive a new car with a small deposit for a lower monthly payment than if you were funding the capital cost.
In addition, when dealing with a reputable leasing company, you will get the benefit of tapping into long-established bulk-buying trade relationships.
In short, the great deal that you get on one car will usually be a result of great discounts secured by ongoing business between the leasing company and the manufacturer.
Let’s not forget that when you buy a car, you buy into the “D” Word: depreciation. A car will only ever go down in value as a depreciating asset – in many cases, it is far better to fund the depreciation and have the benefit of a much lower monthly payment.